After making continued contract lows throughout this week, global grain markets (CBOT, Matif, Liffe) started to see a slight recovery in the latter part of the week. Despite strengthening Sterling, UK May wheat futures ended the week at £142.50/T, yet momentarily touched £140/T earlier in the week, the lowest value since January.
On the face of it, this is a somewhat disheartening situation for raw material buyers, because any wheat bought in the past 11 months for the new year is ‘wrong’ (although not by much). UK wheat prices have been pretty flat since August when most purchases have taken place, with an average of about £145/T. In terms of future price direction, no one has any idea. Some exports are taking place with 147,000T shipped to the end of September.
DEFRA released its official wheat Supply and Demand figures for 2017/18, showing a harvest of 15.2mt and an exportable surplus of 1.0mt. However the Matif is currently €164.75/T and the Liffe €161.3/t so a difference of only €3.5/T, compared to the €12/T difference back in August, thus UK wheat is too expensive to export. Global grain consumption for 2017/18 is projected to exceed 2.1Bln T for the first time due to increased demand for food, feed and industrial uses. Food continues to drive global demand for wheat, whilst livestock feed and industrial use have driven global maize requirements to a new high.
The world’s biggest exporter of wheat, Russia, continues to satisfy the world’s biggest buyer of wheat and this week was the sole supplier for the 7th consecutive tender. Despite its low wheat yield, Russia has acreage and it has ambition to be the cheapest and maintain its status as the biggest exporter of wheat. Their Minister of Agriculture suggested that by improving their productivity (84Mln T this year) and infrastructure, they could increase their export capability from the current 45Mln T to 75Mln T within five years. EU wheat exports are somewhat constipated, and Australia may suffer the same fate as it harvests its 21Mln T.
Soya bean and soya bean meal have been trading sideways for the past six weeks, as their sister, soya oil has been lifted higher by crude oil. Light crude oil was $42/barrel in June and is now $58/barrel. US soya bean stocks are reported as down 11.5% from last year, with USDA acreage projections showing only minor gains. China’s soya imports continue to grow, and are 11Mln T higher for the period Jan-Oct compared with last year. There are rumours that delays in GM paperwork as part of their import procedure is putting downward pressure on the market, perhaps because China’s soya stocks have grown to 6.3Mln T.
We have rarely mentioned vitamins in this report, but there is a supply crisis in progress. The vitamin supply chain was already tight as China’s factory inspectors closed a number of vitamin-producing plants in an attempt to reduce air pollution by 20 percent this year. So the B-Vitamins in particular are in short supply. Then at the end of October a fire broke out at a BASF factory near Mannheim, Germany; this plant produces a precursor molecule (Citral) used in the production of vitamins A, E, Citranaxanthin (the only BEIC red egg yolk pigment), Beta Carotene and other nutritional, colourant and olfactory essentials. This single factory was responsible for producing enough Citral to supply about 50% of the world’s vitamin production. The resulting world shortage has caused huge price increases with, for example, Vitamin A rising from €21/kg to €345/kg in the past few weeks. BASF has claimed Force majeure, and the factory will not be in production again for several months, so there are both supply and contractual issues to be addressed in multiple supply chains. In terms of Humphrey customers, we have secured vitamin supplies to March 2018, and are currently working on a solution to the red yolk pigments – but it will be more expensive. Vitamin and egg yolk pigment prices are expected to remain high for the foreseeable future.
Rats are not normally worth much – especially dead ones. However a 1942 explosive rat is due to be auctioned with a presale estimate of £1,500! Formerly owned by SOE agent and saboteur, Jack Dickens, his job was to plant these rats pre-stuffed with plastic explosive, fuse and detonator in the boiler rooms of Nazi-occupied France. Unfortunately the first batch of 100 rats was intercepted by Germans. It was not a complete disaster because the Germans then wasted hundreds of manhours searching for non-existent bombs.